What is a rewards credit card and how does it work?
Editor's Note
Rewards credit cards allow people to earn rewards when they make purchases with their cards. By using a rewards card for your everyday spending, rewards can quickly add up, helping you get closer to your next vacation or big purchase.
Here, we explain what rewards cards are and how they work.
Related: The best rewards credit cards for each bonus category
What is a rewards credit card?
A rewards credit card "rewards" you with cash back, points or miles when you buy things with your card.
You can then redeem the rewards you've earned for everything from statement credits to travel to gift cards, merchandise and more. Most rewards credit cards fall into two main categories: travel credit cards and cash-back credit cards.
Related: How (and why) you should earn transferable credit card points
How to choose a rewards credit card
Before choosing a rewards credit card, it helps to analyze your spending habits. What do you spend the majority of your money on? This can help you determine what type of rewards card is best for you. For example, do you prefer to earn cash back or travel rewards?
Cash back is straightforward and offers more flexibility, as it can be used for things other than travel. Travel rewards can vary.
Flexible currencies like American Express Membership Rewards points and Chase Ultimate Rewards points can be redeemed for travel through each issuer's travel portals; these points can also be transferred to travel partners.
Cards that earn travel points often let you convert your points to cash back. However, we don't recommend this as the redemption rates for this method are usually poor. For example, Amex Membership Rewards points can be converted into cash back, but at a reduced rate of as little as 0.6 cents per point.
When redeeming, I recommend that you aim for a minimum of 2 cents per point.
Other travel credit cards include cobranded airline and hotel cards. These earn points or miles with a specific airline or hotel. For example, United Airlines credit cards earn United MileagePlus miles, and Hilton cards earn Hilton Honors points.
Lastly, many reward credit cards charge an annual fee. These fees can vary greatly depending on the card, but cards with higher annual fees typically offer more perks and benefits. Always measure the potential rewards and benefits against the annual fee to justify the cost.
Related: Cash back vs. travel rewards: How to choose a credit card
What credit score do I need for a rewards card?
Most travel rewards credit cards require you to have a good credit score of at least 670. It all depends on the card you are applying for. Some premium rewards credit cards may require excellent credit to be approved. There have been cases where people with lower or higher scores got approved or rejected; it depends on your specific scenario.
If your credit card application has been declined and you believe it should have been approved, the card issuer may have a reconsideration line; you can call this line and ask them to reevaluate your application. It is also important to note that some cards have application restrictions that could prevent you from getting approved.
Related: What is a good credit score?
How to maximize card rewards
One way to maximize credit card rewards is to use multiple rewards cards to take advantage of bonus earnings in multiple spending categories.
For example, you could combine the American Express® Gold Card and the Capital One Venture Rewards Credit Card. Use the Amex Gold for dining at restaurants worldwide as it earns 4 points per dollar spent (on up to $50,000 in purchases per calendar year, then 1 point per dollar).
You should also use the card for grocery shopping at U.S. supermarkets as it earns 4 points per dollar, up to $25,000 of spending per calendar year, then 1 point per dollar.
The Capital One Venture Rewards earns at least 2 miles per dollar spent across the board, so you could use this for the remainder of your spending.
There are many ways to combine two or even three rewards credit cards to maximize rewards.
Related: Better together: The ultimate guide to the best credit card combinations
Bottom line
A rewards credit card allows you to earn rewards on almost all of your spending. Remember that the right card should fit your lifestyle, and if there is an annual fee, make sure it's justified. When used properly, the rewards you earn from credit cards can be a great way to kickstart your next trip or save you money.
Related: Best rewards cards
TPG featured card
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Terms & restrictions apply. See rates & fees.
| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 5X | New! Earn 5X Membership Rewards® points on prepaid hotel stays booked through AmexTravel.com or the Amex Travel App. |
| 3X | Earn 3X Membership Rewards® points on flights booked through AmexTravel.com, the Amex Travel App, or purchased directly from airlines. |
| 2X | Earn 2X Membership Rewards® points on prepaid car rentals booked through AmexTravel.com or the Amex Travel App and cruises booked and paid through AmexTravel.com. |
| 1X | Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases. |
Pros
- Valuable dining and food-related credits
- Flexible rewards with airline and hotel transfer partners
- Multiple travel and purchase protections
- No foreign transaction fees
- Access to Amex Offers for additional savings (enrollment required)
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $8,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- New! Earn 5X Membership Rewards® points on prepaid hotel stays booked through AmexTravel.com or the Amex Travel App.
- Earn 3X Membership Rewards® points on flights booked through AmexTravel.com, the Amex Travel App, or purchased directly from airlines.
- Earn 2X Membership Rewards® points on prepaid car rentals booked through AmexTravel.com or the Amex Travel App and cruises booked and paid through AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- Pay It® lets you tap in the American Express® App to quickly pay for small purchase amounts throughout the month and still earn rewards the way you usually do. Plan It® gives you the option to split up big purchases into equal monthly payments with a fixed fee. You’ll know upfront exactly how much you’ll pay.
- Updated! $120 Dining Credit: Earn up to a total of $10 in statement credits monthly when you pay with the Gold Card at Grubhub (including Seamless), Buffalo Wild Wings, Five Guys, The Cheesecake Factory, and Wonder. This can be an annual savings of up to $120. Enrollment required.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year at over 10,000 qualifying U.S. Resy restaurants after you pay for eligible purchases with the American Express® Gold Card. That’s up to $50 in statement credits semi-annually. Enrollment required.
- $84 Dunkin' Credit: Earn up to $7 in monthly statement credits after you pay with the American Express® Gold Card at U.S. Dunkin’ locations. Enrollment required.
- $120 Uber Cash on Gold: Enjoy up to $120 in Uber Cash annually with your Gold Card. Just add your Card to your Uber account and you'll get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an Amex Card for your transaction.
- New! As an American Express® Gold Card Member, you can enjoy complimentary Hertz Five Star® Status. Enjoy benefits like skipping the counter at select locations, adding an additional driver at no additional cost*, and vehicle upgrades**. Benefit enrollment and Hertz Gold+ registration are required. *Additional drivers must meet standard rental qualifications and must be a spouse or domestic partner to qualify as complimentary. Other additional drivers subject to fees. **Benefits are subject to availability and vary by location. Additional Hertz program Terms and Conditions including age restrictions apply.
- Take advantage of a $100 credit towards eligible charges* at over 1,300 upscale hotels worldwide when you book The Hotel Collection through AmexTravel.com or the Amex Travel App **. *Eligible charges vary by property. **The Hotel Collection requires a two-night minimum stay.
- Book your travel through the Amex Travel App with added peace of mind – backed by American Express® service and support. Only for American Express® Card Members.
- Whenever you need us, we're here. Our Member Services team will ensure you are taken care of. From lost Card replacement to statement questions, we are available to help 24/7.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.